How to Determine Whether Reshoring Is Right for Your Business

Helping with companies’ reshoring efforts is the Reshoring Initiative, whose mission is to bring good, well-paying manufacturing jobs back to the United States. We caught up with Founder and President Harry C. Moser, who spoke at the Mississippi conference, about the current and future state of reshoring.

MCEOB: How can a manufacturer benefit from reshoring?
HM: For OEMs—bigger companies with branded products—many of them offshored years ago without doing a comparison of total cost of ownership (TCO) for domestic vs. offshore. Also, times have changed. Chinese wages are going up 15% to 18% a year, and it’s time to re-evaluate the math. If they did, many would conclude that reshoring would be more profitable, they would have a better quality product, and a better company image if they reshored.

For suppliers of small and midmarket companies, we recommend that they reshore when their customers reshore. For example, if a large company brings back the assembly of a large piece of machinery or equipment, that would provide an opportunity for them to start purchasing many more of the components in the U.S. than when they were assembling in China. So suppliers benefit from that action.

MCEOB: What are the top three things manufacturing CEOs need to consider when evaluating reshoring?
HM: First, look at products where they have pain points—issues of quality, delivery, intellectual property, high travel expenses, midnight phone calls, etc.—and identify the components and sources associated with them. Next, evaluate the total cost of ownership (TCO) for these products. It’s not just the price, but the duty, freight, packaging, travel, intellectual property risk, etc. Evaluate the TCO for those parts and components where you are having the most issues and are now motivated to do something.

Finally, see if others in your industry or region are reshoring. If so, talk with those CEOs to gain more insight into the process and to see what factors to consider, such as rising wages in China, the impact on innovation when you separate engineering from manufacturing—all the quality considerations. These are all typically not as good from lower-wage countries.

MCEOB: What can a manufacturer expect their reshoring initiative to cost?
HM: It depends on what they will be reshoring. There are three components to consider:

First, a company should stop sending work offshore without doing the math. If the analysis shows that it’s more profitable to start up new work here, then keep your existing work offshore but start new projects here.